Esure cautious but profits edge higher

Esure warned today that the home and motor insurance markets will remain “highly competitive” this year as it reported a 2.5% rise in full-year profits.

The group posted pre-tax profits of £118.4 million and paid a better-than-expected final year dividend of 13.3p, yet its shares still languish below the 290p they were floated at last March — dipping a further 0.1% to 270.5p today.

Boss Stuart Vann said the company was prepared to either increase or reduce the amount in premiums it took from customers this year, depending on how rates moved in the market.

“We have been making the right calls and believe our underwriting results will eventually speak for themselves,” he said. “Rather than worrying about the share price, I will continue to focus on the business.”

Esure strengthened its combined ratio to 89.7% last year, compared with 92.8% in 2012. This effectively means it took in more in premiums that it paid out in claims.

It said it expected to incur just £5 million of winter weather-related claims.

Analysts at Oriel Securities said: “Esure is well positioned in the UK by focusing on low-risk underwriting; with options to grow modestly by re-entering segments of the market it previously exited, having profit streams that are less sensitive to softening rates and having a management team that is highly incentivised to grow earnings.”